Cox News Service SANTA FE, N.M. - In the tiny
cubicles of a former convent where nuns once touched rosaries for
divine guidance, young geniuses in ponytails now tap computer keys
for revelations about the economy.
So far, they've ``discovered'' that most economic forecasts
don't have much more than a prayer of panning out.
That insight may seem less than earthshaking to a public
bombarded daily by economic epistles, interpretations and forecasts
that often contradict the previous day's batch.
But the physicists and economists at the Santa Fe Institute, a
fledgling research organization, think they're hot on the trail of
ways to revolutionize economic forecasting. If successful, their
work could alter the way individuals, companies and government
bodies decide when and how to spend money.
Institute scientists claim that making long-term economic
forecasts is as futile as trying to predict today how fast the wind
will blow at next year's Macy's Thanksgiving parade.
But with modern computers that can process ``experimental''
mathematical techniques, they claim they can improve short-term
forecasting - perhaps dramatically.
According to Dr. George A. Cowan, the 70-year-old president of
the institute, its goal is to ``provide better estimates of the
possibilities and probabilities,'' not to turn economic forecasting
into magic. The effort is supported financially by the likes of
Citicorp, IBM, the National Science Foundation and the U.S.
Department of Energy.
Nowadays, people make spending decisions based on what they
read, hear and expect about the future. Essentially, the methods
being developed at the institute would give decision-makers a set of
odds with which to place their bets.
``That may be good enough,'' said Cowan, who founded the
institute after a 40-year career at the Los Alamos National
Laboratory, 40 miles to the north. ``You don't have to hit home runs
Knowing even a little more about how the economy works might be
enough to help policy-makers avoid boners, such as the Federal
Reserve's disastrous decision to clamp down on credit after the
stock market crashed in 1929. That decision to pull money out of
the system after the crash is generally cited as a cause of the
By relying too heavily on economic data that is imprecise and
old, Fed policy-makers are currently walking a dangerous tightrope,
according to scholars like Dr. Michele Boldrin, a Northwestern
University economist conducting research at the Santa Fe Institute.
``The real world is so damn different from the theoretical
abstract models (economists) play with,'' said Boldrin, and
therefore, ``fiddling with the economy'' as the Fed now does is